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What has driven performance in 1QFY09?

Dabur reported a consolidated topline growth of 16% YoY led by 13% YoY growth in the consumer care segment (CCD), 25% YoY growth and 15% YoY growth in the consumer health care (CHD) and foods segments respectively. Dabur's International Business continued to grow at a rapid pace with a 39.5% YoY growth. The retail venture reported 11 m sales in the current quarter.

Segment Revenue

1QFY08

1QFY09

(%) Change

Consumer Care segment

4,141

4,694

13.3%

% of total revenue

78.1%

76.6%

Consumer Health segment

321

401

24.9%

% of total revenue

6.1%

6.6%

Food

727

839

15.4%

% of total revenue

13.7%

13.7%

Retail Business

-

11

% of total revenue

0.0%

0.2%

Others

115

180

56.8%

% of total revenue

2.2%

2.9%

Total

5,304

6,124

15.5%

The standalone sales were up 12.8% YoY. Hair oil, shampoo, health supplements and foods segments witnessed strong growth momentum. However, skin and baby care, digestives and home care performance was muted. Skin care category witnessed a de-growth of –5.3% during 1QFY09 led by reduction in sale of ‘Vatika’ soap. The category recorded growth of 12.5% YoY during the quarter after excluding ‘Vatika’ soap. In the home care, ‘Odomos’ brand remained under pressure and the company is taking steps to revive it. Consumer division witnessed a turnaround with OTC portfolio growing by 32.8% YoY and the ‘Ethical’ portfolio reporting 14.7% YoY growth. It also launched 3 new products during the quarter.

Regarding the overseas regions, GCC region witnessed a 52% YoY growth, while Dabur Egypt grew by a robust 111% YoY. Sales in African markets more than doubled during 1QFY09. In the retail arena, Dabur has 7 stores and plans to roll out 5 to 6 more this year.

The consolidated margins declined by 80 basis points, while the standalone margins were higher by a similar percent. Material costs were higher by 0.8% as a percent of sales. Efficient management of input cost & price increases (4% to 5% across all brands) have been able to reduce greater impact of inflation. Even labour and ad spends grew by 19% YoY and 18% YoY respectively.

On the standalone front, lower ad spends and raw material prices (as a percent of sales) have aided the growth. On the segmental PBIT, while double-digit growth was witnessed across all the segments, the margins of the consumer care were lower by 0.6% at 24.3% and that of consumer health care were lower by 2.6% at 24.9%. On the retail front, the company continues to face losses, excluding which the PBIT has grown by 10.8% YoY.

Inspite of higher other income and lower interest costs, the profits grew at a slower pace than the topline. Lower margins and higher effective tax rates restricted the growth. Standalone bottomline grew by 25% YoY led by better margins and higher other income

What to expect?

At the current price of Rs 91, the stock is trading at a price to earnings multiple of 15.7 times our FY11 estimates. The company witnessed mixed performance across its segments. While the key segments continued to do well, the company is taking steps to revive and relaunch the key brands in the under performing segments. The turnaround of the CHD division is also a positive.
Its strong presence in less penetrated and high growth categories, ability to consistently launch new products and variants and its wide geographical reach makes it a strong play. We have a positive view on the stock.

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